Sovereign Gold Bonds

The government said it will launch the first tranche of sovereign gold bonds for the current fiscal on April 16, offering a 2.5 percent annual interest to investors. The latest issuance of bonds is part of the government’s efforts to garner as much as Rs 5,000 crore from all the three gold schemes this fiscal — the same as 2017-18 (Revised Estimate). Applications for the bond will be accepted from April 16 to April 20, the finance ministry said in a statement. Bonds will be issued to eligible applicants on May 4. Investors will get the interest payable semi-annually on the nominal value of the investment.

The sovereign gold bond, gold monetisation scheme and Indian gold coin were launched by Prime Minister Narendra Modi in late 2015, as the government wanted to discourage import of the precious metal and curb its damaging impact on trade balance. The gold schemes are, however, still far from a roaring success. The government had budgeted to mop up Rs 10,000 crore from the three schemes in 2016-17 but could raise only Rs 3,451 crore, which was equivalent to just around 2 percent of the country’s annual consumption.

Analysts, however, have said the schemes provide more choices to investors and could potentially be a massive success if designed better and once investors are made aware of their benefits. Of the two big schemes, the gold bond has been more popular than the monetisation scheme (the government mopped up just around 15-20 tonne under the monetisation scheme since its launch in November 2015, according to industry estimates). So the government seems to be focusing more on the bond scheme.

While the interest is taxable, investors have been exempted from any tax on capital gains from the redemption of such gold bonds. The indexation benefits will be provided to long-term capital gains arising to any person on the transfer of bond. Bonds will be tradable on bourses within a fortnight of the issuance, on a date to be notified by the RBI.